Today’s focus is on the GBP/AUD because its building an interesting contracting triangle chart pattern. Our analysis reviews the pattern in more detail, plus how we plan on trading the bullish or bearish breakout.
Furthermore we will also add the main and secondary targets for each breakout direction. Last but not least, tomorrow we are back with our mid weekly video update which will be split in 2 parts: the usual Forex overview and a full scale analysis of both the EUR/USD and GBP/USD.
The first bullish break above the strong confluence of resistance levels (orange lines) started a strong 800+ pip rally from 1.63 tot 1.71. The bullish momentum is indicated by the green arrow and was almost a straight arrow upwards, besides the small retracement back to the 38.2% Fibonacci support level.
The GBP/USD made a bullish bounce at the 38.2% Fib, which created a trend continuation towards the first target at the -27.2% Fibonacci level of 1.7160. In the meantime, price has also shown a major respect for this target by falling back to 1.69. It is exactly this particular pullback that is creating an interesting market structure for potential trades up and down.
A break of the support zone (blue line) could see the development of a bearish breakout whereas a break of the resistance zone (red box) could price hit the next -61.8% Fibonacci target (blue arrow). In the meantime, price could also rechallenge the resistance zone without breaking it (purple arrow). Time for a closer look on lower time frames.
The 1 hour chart shows how strong the GBP/AUD bullish momentum really was: breaking above the 3rd level and almost instantly reaching the 5th Wizz level (purple numbers). A bit later price also managed to reach the 6th and even break above the 6th Wizz level.
You can also see how price pulled away from the moving averages plus how the short-term MA moved away from the long-term MA, which offered continuation setups in that impulsive price action. Now the moving averages are flat and close to each other, which indicates an indecisive market. The uptrend seems to be building a pause.
The main question is what traders could expect next?
First of all, the corrective pattern looks like a contracting triangle chart pattern with a clear support (green) trend line and resistance (orange) trend lines.
Secondly, prior to the pattern, we can see a bullish momentum (green arrow) and a bearish momentum (orange arrow). From this point of view, the GBP/USD could breakout to both directions:
The breakout candle itself will be important for both potential breakouts – see dark red and purple arrow. A good breakout candle will indicate whether price is indeed ready for a sustainable break or whether it will turn into a false break.
All in all, I’m waiting for a breakout candle to break the triangle pattern. Or, of course, an ecs.SWAT signal for a setup.
Let’s talk about targets for the potential bearish and bullish breakouts.
Bullish break: 1.7060, 1.7107, 1.7160, and 1.7400.
The first targets for the upside are the Fibonacci levels like 61.8% and 78.% at 1.7060 and 1.7107. Price could retest the top and fail to break this resistance zone. The failure could see the start of a larger bearish correction. If price manages to break above these resistance Fibs, then a larger uptrend continuation towards the 7th Wizz level at 1.74 is possible.
Bearish break: 1.6816, 1.6750, and 1.6725.
The main targets for retracements are always the -27.2% and -61.8% Fibonacci targets, at first. It doesn’t matter if price is only making a correction or a larger revesal, because these levels are usually ‘safe’ targets to aim for in both scenarios.
Our Elite CurrenSea SWAT system is not only helping us trade but also other SWAT traders. We receive regular emails and udpates from our SWAT and WIZZ traders with their performance. This is, we think, critical for any success. Just because we managed to make pips with our system, does not automatically mean that you will too. But our trading systems are built in a way that copying our style is doable and achieveable.
We make trading simple. We make wave analysis simple. That is what SWAT trading is all about: simple wave analysis and trading.
We do not share all of the praise we get in webinars and emails and tweets, because we do not want to bother you with this. But once in a while, we want to share this with the world. Look at the image below that shows a trader using our Wizz tool:
16 trades, 15 wins, +700 pips and +19% profit.
We are so happy for this trader!!
Anyhow, catch you tomorrow with our bi-weekly market videos on Forex and EUR/USD, GBPUSD. Thanks for reading!
Wish you good trading,
My twitter: @ChrisSvorcik
More info on our ecs.SWAT course and trading system
Elite CurrenSea Twitter: @EliteCurrenSea
YouTube: Elite CurrenSea
Market video from Sunday for other currency pairs: